I often find myself hearing reasons or rationale for the stock market’s movements, which really is just a collection of emotions all packaged together to form a result. I have to ignore these comments, if I listen too carefully I may get swept up in trying to rationalize the action. Without trying to be too obvious, too much fear and the market goes down, but too much optimism and the market goes higher. We can see all of this played out on a chart too, I’ve said many times a technical chart is fear/greed displayed in graphic form.

Yet, the chart shows us a complete view of history. These are numbers and facts but open to interpretation of patterns, trends and momentum. The thought here interpreting the chart of human behavior (which never changes) could give us a clue as to the next move. It is the hard right edge of the chart that we look to establish, hence where price is going – which is no guarantee but history is a great guide.

Ford (F) is recently down 47c to $16.10 after the automakers reported February sales fell about 2% last month compared to the prior year. March call option implied volatility is at 18, April is at 19, May and September is at 20; compared to its 26-week average of 23.

General Motors (GM) is recently down 13c to $37.47 after reporting February U.S. sales rose a bit over 4%, but that was below the nearly 6% increase that had been forecast by analysts. March call option implied volatility is at 20, April is at 22, June is at 23, September is at 22; compared to its 26-week average of 24.

Fiat Chrysler (FCAU) is recently down 59c to $15.23 after reporting a 6% increase in U.S. sales. March, April and June call option implied volatility of 34 compares to its 16-week average of 38.

Believe it or not, the S&P 500 (SPX) (SPY) lost ground last week. It was a “just barely” situation, and the Russell 2000 (RUT) (IWM) as well as the NASDAQ Composite (COMP) (QQQ) both ended the week higher even with Friday’s pullbacks. The across-the-board weakness to close out the week, however, is something to think about even if it’s not yet something to worry about.

The odds are weighed below. Let’s first dissect last week’s economic numbers and preview what’s coming up this week.

Economic Data

It was a busy week last week from start to finish on terms of economic news. We’ll stick with the highlights and keep the discussion to a minimum. Charts do most of the talking anyway. In no particular order…

Odds are good you’ve heard the United States is now experiencing deflation; the annualized inflation rate now stands at -0.09%. The pullback in oil prices, and therefore gasoline prices is the culprit, but even on a core basis (not counting food and energy) inflation is quite low.

Though consumers aren’t feeling quite as good as they did a month ago, in the grand scheme of things they’re still feeling optimistic. Though both the Michigan Sentiment Index and the Conference Board’s consumer confidence levels pulled back a little in February, both are still near long-term highs created by a firm uptrend.

Home sales were off slightly in January. Sales of existing homes slipped from a December pace of 5.07 million to 4.82 million, below expectations of 4.95 million. New home sales of an annualized pace of 481,000 was down a bit from December’s 482,000 pace, but better than the expected 470,000 units.

Finally, though home sales were a little anemic, prices at which those homes are being sold continue to rise. Both the Case-Shiller 20-city Index and the FHFA Housing Price Index (seasonally adjusted in both cases) were up in December, extending already well-established uptrends.

Home Price Trends ChartSource: Thomson Reuters Eikon

Economic CalendarSource: Briefing.com

Though this week is another full week in terms of economic news, there’s little doubt as to the highlight – Friday’s employment news. Broadly speaking, economists expect February’s numbers to look very much like January’s. across the board.

Best Buy (BBY) is up $1.37 to $40 in the preopen after reporting Q4 EPS $1.48, compared to consensus $1.35. The technology retailer announced a special dividend of 51c and raised its regular dividend 21% to 23c. March weekly call option implied volatility is at 60, March is at 42, April is at 35, June is at 34; compared to its 26-week average of 41.

Palo Alto (PANW) is down $0.87 to $145.10 after the security software company reported better than expected Q2 results and outlook. March weekly call option implied volatility is at 83, April is at 45, June is at 39; compared to its 26-week average of 43.

Nutrisystem (NTRI) is up $2.20 to $19.35 in the preopen on better than expected Q4 results and a strong start to the spring diet season. March call option implied volatility is at 66, April is at 42, June is at 38; compared to its 26-week average of 37.

CBOE S&P 500 Skew Index (SKEW) at 126.01 SKEW measures the purchase of out-of-the-money S&P 500 Index puts that require a very large downside move to profit from long put positions. An increase of this index indicates greater expectations for an extreme down move.

Lumber Liquidators (LL) is recently down $10.57 to $41.22 after ’60 Minutes’ alleges floor may violate health and safety violations. March put option implied volatility is at 107, April is at 89, May is at 76; compared to its 26-week average of 52.

Aruba Networks (ARUN) is recent down 36c to $24.45 after HP (HPQ) announced its acquiring the network company for $3B. March call option implied volatility is at 16, April is at 17; compared to its 26-week average of 45.
Stratasys (SYSS) is recently up $1.26 to $63.32 after the 3D company reported better than expected Q4 revenue.
March weekly call option implied volatility is at 53, April is at 39, June is at 41; compared to its 26-week average of 45.

Extended Trading Hours (ETH) for VIX options started today, Monday, March 2nd. Extended Trading hours for VIX options are 2:00 a.m. to 8:15 a.m. Central Time (“CT”). Regular VIX trading will resume at 8:30 a.m. and continue until 3:15 p.m. CT. www.cboe.com/ETH for more info. China interest rate cut of 0.25% to spur economy was expected. Personal Income for January rose 0.3%, Spending with a surprise drop of 0.2%. ISM to be released 30 minutes into trading day. A communique from a trader in Myanmar tells us it’s “Peasant’s Day here in Myanmar”, a good day to visit parks, relax, etc. With coldest February in Chicago history, might not be right day to visit local parks here or Boston. Commodities, interest rate complex and overseas markets pretty flat, maybe others are relaxing. Volatility as an asset class:

NXP Semiconductors (NXPI) is up $10.41 to $95.50 in the preopen after announcing a merger with Freescale Semiconductor (FSL) in a transaction which values the combined enterprise at just over $40B. Overall option implied volatility of 34 compares to its 26-week average of 33.

Freescale Semiconductor (FSL) is up $3 to $39.11. Overall option implied volatility of 44 compares to its 26-week average of 48.

JinkoSolar (JKS) is down 77c to $21.12 in the preopen after the solar PV company reported less than expected Q4 revenue. March call option implied volatility is at 67, April is at 58, June is at 60, September is at 61; compared to its 26-week average of 63.

CBOE S&P 500 Skew Index (SKEW) at 126.40 SKEW measures the purchase of out-of-the-money S&P 500 Index puts that require a very large downside move to profit from long put positions. An increase of this index indicates greater expectations for an extreme down move.

The S&P 500 hardly budged on a week over week basis and VIX drifted lower. The March future drifted lower basically in sync with the index, but is still at a health premium relative to the index. I’m attributing that to the pending employment numbers coming out next week. I need to do a study and see what happens with that spread on the weeks that we get the employment report. I wouldn’t be surprised to see the gap narrow post-employment as there is often no pending market moving event until after expiration.

On the trading front there were two trades that appear to expect VIX and the March contract to drift or stay lower. Early in the day a trader came in and sold 4000 VIX Mar 18 Calls at .76 and bought the same number of VIX Mar 21 Calls at 0.44 for a net credit of 0.32. Late in the day there was a buyer of a put spread who purchased 3000 VIX Mar 14.50 Puts at 0.43 while selling 3000 VIX Mar 13.50 Puts at 0.12 for a net cost of 0.31. The maximum reward for this trade is 0.69 with a maximum loss of 0.31. This shows up in the payoff diagram below –

Last week was fairly quiet despite the second revision of GDP coming in a little light. We may see a little more volatility action in the coming week as on Wednesday the ADP Employment Change report is released Wednesday before the open and then the government version of the employment report coming on Friday. Both of these reports are significant as they are a first look at economic activity for February.

Despite the S&P 500 losing a little value last week, with Friday to blame, the VXST – VIX – VXV – VXMT curve actually did shift lower. VXST broke 11 for the first time since Christmas Eve of last year. I find this a bit surprising due to the pending employment reports mentioned above.

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.

CBOE Expanding Its Index Options Complex
On Thursday, CBOE signed a licensing agreement with the London Stock Exchange Group to develop and list options on more than two dozen FTSE and Russell Indices. Under the agreement, CBOE will become the exclusive U.S. home for options on the FTSE and Russell indices. The parties will also collaborate on product development and investor education.

Follow RMC Next Week
The 31st annual CBOE Risk Management Conference U.S. kicks-off next Wednesday in Carlsbad, California. Be sure to check out the following resources to follow along with the latest news and highlights during RMC:

The question we have heard over the last several years was “CBOE VIX Futures have extended trading, when will VIX Options have Extended Trading Hours”?

On Monday, March 2nd, Extended Trading Hours (ETH) for VIX options will launch. Trading hours will be from 2:00 a.m. to 8:15 a.m. Central Time (“CT”). Regular VIX trading will resume at 8:30 a.m. and continue until 3:15 p.m. CT.

Since June 2014, the trading hours for futures on the CBOE Volatility Index® (VIX®) have been expanded to nearly 24 hours a day, five days a week. Average Daily Volume (ADV) in VIX Futures has been great with a surprising amount of that in extended hours.

With Average Daily Volume with CBOE VIX options being two to three times VIX futures volume, extending trading hours to reach more traders and investors makes great sense.

Trading desks in Europe have expressed enthusiasm for the availability of VIX options during their regular trading sessions (I’ve heard from several Asian traders who look at VIX Options as a tool to adjust portfolio risk at the end of their trading sessions). As opposed to VIX Futures, remember that VIX Options will only include an extended morning session, 2:00a.m. to 8:15 a.m. Central Time.

For more information about Extended Trading Hours in VIX, go to

www.cboe.com/ETH . CBOE Regulatory Circular RG 15-014 is available at that site.

ONE LAST COMMENT: Extended Trading Hours in SPX Options are expected to commence the following Monday, March 9th.

(Editors Note: For those attending Traders Expo New York at the Marriott Marquis this weekend, please stop by and say hello to Larry McMillan and his group. Russell Rhoads from the Options Institute at CBOE will be at Traders Expo as well).

The stock market continues to move higher, albeit at a very slow pace. That makes the $SPX chart bullish, of course, and it will remain bullish as long as $SPX holds above support. The highest support level is the 2090-2100 range that $SPX traded in last week.

Equity-only put-call ratios generated their most recent buy signals on February 3rd. Those were well-timed buy signals, and they remain in place. These ratios continue to drop, and that is bullish for stocks.

Market breadth has not been a particularly strong supporter of the rally, however. It hasn’t been completely negative, but it hasn’t chimed in with the strength that one would expect to see when $SPX
is breaking out to a series of new all-time highs. Regardless, both breadth oscillators remain on buy signals, and both are in modestly overbought territory.

Volatility indices have been declining for the entire month of February. That is bullish for stocks. $VIX remains bullish as long as it continues to close below 17.

In summary, the intermediate-term outlook is bullish, in line with the strength of the most important indicator — the chart of $SPX. The fact that breadth has not really confirmed the rally is a minor nuisance, but as long as $SPX support is not violated, breadth doesn’t matter.

J.C. Penney is recently down 45c to $8.67 after posting a surprise Q4 loss as higher operating expenses offset higher-than-expected sales. March weekly call option implied volatility is at 48, March calls are at 42, April is at 35; compared to its 26-week average of 54.

Weight Watchers (WTW) is recently down $5.81 to $11.70 on a Q4 loss and plans to cut $100M in costs. March call option implied volatility is at 75, April is at 84, July is at 73; compared to its 26-week average of 43.

Ross Stores (ROST) is recently up $6.14 to $105.19 after reporting better than expected Q4 results and inline guidance. March and April call option implied volatility is at 18, May is at 19; compared to its 26-week average of 23

VIX methodology for Apple (VXAPL) +1% to 28.91 into Apple (AAPL) special event on March 9th. cboe.com/VXAPL

GDP for Q4 reduced from 2.6% to 2.2%. Slightly lowered revision had been expected, but compared to Q3 Final GDP at 5% not that encouraging. Chicago PMI after the opening and a few other indicators later in the morning. Oil at $49, 10-year at 2%. Extended Trading Hours (ETH) start Monday March 2nd for VIX, and Monday March 9th for SPX. To read a blog from a few weeks ago about ETH, click on the following: http://www.cboeoptionshub.com/2015/02/06/extended-trading-hours-planned-spx-vix-options/ Volatility as an asset class:

Monster Beverage (MNST) is up $12.26 to $137 in the preopen after reporting strong Q4 results and expanding its partnership with Coca-Cola (KO). March weekly call option implied volatility is at 52, March is at 39, June is at 29; compared its 26-week average of 35.

Gap (GPS) is up $1.09 to $41.49 after reporting better than expected Q4 and comparable store sales rising 2%. March weekly call option implied volatility is at 49, March is at 33, April is at 27; compared to its 26-week average of 26.

Splunk (SPLK) is up $4.94 to $74.50 in the premarket after the provider of software for real-time operational intelligence reported better than expected Q4 results and raised its sales outlook. February weekly call option implied volatility is at 179, March is at 64, June is at 53; compared its 26-week average of 35.

VIX methodology for Apple (VXAPL) at 28.70 into $AAPL special event on March 9thcboe.com/VXAPL

Kohl’s (KSS) is recently up $1 to $71.90 on a better than expected Holiday Q4 quarter. March call option implied volatility is at 22, April is at 21, July is at 20; compared to its 26-week average of 22.

Sears Holdings (SHLD) is recently down $2.78 to $35.12 after announcing progress towards forming a real-estate investment trust and a Q4 loss. March call option implied volatility is at 71, April is at 58, June is at 61; compared to its 26-week average of 60.

Transocean (RIG) is recently up 11c to $16.15 after reporting a $922M Q4 charge to correct the value of its drilling business. March call option implied volatility is at 55, March is at 55, May is at 61; compared to its 26-week average of 39.

VIX methodology for Apple (VXAPL) +5% to 29.48 into $AAPL special event on March 9th. cboe.com/VXAPL

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 1.5% to 11.47; compared to its 50-day moving average of 16.21 stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) up 0.01% to 268.83 compared to its 50-day moving average of 263.80 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is down 76c to 928.66 on the U.S., the Consumer Price Index fell 0.7% in January, with the core rate rising 0.2%, versus expectations for the headline CPI to be down 0.6% and the core rate to rise 0.1%.

Big News at CBOE this morning, with CBOE announcing licensing agreement with London Stock Exchange Group (LSEG), to develop and list options based on more than two dozen FTSE and Russell indices and new products as well. Scroll down to previous blog to get the details, we’re excited about this.

Weekly Claims rose 31K, the most in 14 months. US stock futures have turned lower, Oil off almost 3%, near $49.50bbl. Volatility as an asset class

Salesforce.com (CRM) is up $7.73 to $70.60 in the premarket after reporting fourth-quarter earnings and revenue that met analyst expectations and strong growth in deferred sales. February weekly call option implied volatility is at 118, March is at 45, April is at 36, May is at 32; compared to its 26-week average of 33.

TASER (TASR) is down $1.28 to $25.77 after reporting less than expected Q4 EPS on better than expected revenue. March call option implied volatility is at 60, April is at 55, June is at 53; compared to its 26-week average of 53.

SeaWorld (SEAS) is off $0.80 to $19.60 in the premarket on a better than expected Q4 loss on and above estimated revenue. March call option implied volatility is at 49, April is at 31, July is at 27; compared to its 26-week average of 34.

VIX methodology for Apple (VXAPL) at 28.04, compared to its 50-day moving average of 31.91. cboe.com/VXAPL

CBOE S&P 500 Skew Index (SKEW) at 136.25 SKEW measures the purchase of out-of-the-money S&P 500 Index puts that require a very large downside move to profit from long put positions. An increase of this index indicates greater expectations for an extreme down move.

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